China seeks urbanisation as a way to boost growth

By Mary Kwang, The Straits Times, 29 September 2000

As consumption demand increases and tertiary services grow creating
jobs for rural labour, it is expected nation's competitiveness will
improve.

BEIJING -- China, which suffered a dramatic fall in the latest global
competitiveness rankings, sees further urbanisation as a major
strategy to modernise and strengthen the economy.

According to local media reports, the Ministry of Civil Affairs said
12 million people a year would move to urban areas in the next two
decades. Over the same period, 20 new cities will be created each year
to accommodate people who leave their farms.

China now has 672 cities, compared to the US, which has around 8,800
cities. The US emerged the most competitive economy in the world in
the latest annual global competitiveness report by the World Economic
Forum released early this month.

China was ranked 41st, representing a decline of 10 places from the
32nd position it attained last year. The fall is due largely to an
adjustment in the ranking parameters which gave more weight to
technology and innovation.

Mr Mo Xinyuan, an economics editor, said China's rural population
placed the country at a disadvantage since educational and other
public services were spread out over a wide area.

China's current urbanisation rate is 31 per cent, which means that 69
per cent of the population lives in the rural areas.

He said China was also uncompetitive because, unlike the US, China's
agricultural holdings were small as the limited farmland was divided
among a large rural population.

Chinese economists said a study of different countries showed that
there was a positive correlation between urbanisation and economic
growth.

Urbanisation would drive consumption demand and boost the economy,
said the State Council's Development and Research Centre.

Furthermore, expanding urban areas and the accompanying growth of
tertiary services would create jobs for rural labour. Already at
present, 138 million rural residents, or 16 per of the rural
population, are not engaged in farming.

Mr Chen Weibang of the Chinese Research Institute of Urban Studies
said China's decades-old policy of limiting the growth of cities was
found wanting during the Asian financial crisis.

To counter weakened exports during the crisis by attempting to boost
domestic demand, state economists found that demand in the cities was
limited whereas peasants lacked sufficient purchasing power to
stimulate consumption and boost growth.

He noted that some people were fearful of the problems of
urbanisation, such as a more acute shortage of land, environmental
degradation, traffic problems and crime.

He argued that urbanisation in fact saved land, pointing out that per
capita use of space in urban areas averaged 100 sq m, compared to 170
sq m in rural areas.

He also said problems such as traffic and the environment had been
resolved in other cities such as those in the West.

China's urbanisation should proceed at a steady pace, because of the
large population, with a targeted urbanisation rate of 40 per cent to
be achieved by 2010 and 50 per cent by 2020, he said.